Ol' Devil Protectionism, Canadian Aerospace Style

Boys and girls, I am a true aficionado of all sorts of protectionism, appreciating the full range and infinite verisimilitude of human folly. In the same way that some savour fine wine, I savour vile protectionism. Yoghurt protectionism, telecommunications protectionism, airport protectionism...whatever silliness this world has to offer, I'm all for exposing them for the shams that they often are in the name of "national security." Now, it's the turn of the Canadians. Canadians are often regarded as Americans of a timid and inoffensive sort, so this story took me by a bit of surprise: The US firm Alliant Technosystem's bid for the Canadian company MacDonald Dettwiler & Associates was blocked by Canada's industry minister over, you guessed it, national security grounds. Why so, you ask? Is the US harbouring terrorist organizations who may imperil Canadian security or something? Well, no.

The Canadian firm in question is apparently one of the leaders in satellite imaging. As the ice melts further from the North Pole due to global warming, energy-loving ho-ho-hos have been making a land grab for potentially oil-rich Arctic regions, including Canada and the US. MacDonald Dettwiler holds some of the more detailed imaging data that gives clues as to where potential oil bounties are located. Given this fact, the Canadian government has turned back the American suitor while risking a US backlash. Given how protectionist the US often is, I think it's just deserts. In this age of energy scarcity, Canada has decided it's every country for itself, more or less. From the Toronto Star:

After blocking a foreign takeover of the country's largest satellite and space robotics firm, Industry Minister Jim Prentice is refusing to commit federal funds to offset the effect of nixing the sale. Prentice defended the decision to halt the $1.3 billion sale of MacDonald, Dettwiler and Associates (MDA), saying Canada has no choice but to hang on to its technological know-how if it wishes to have a vibrant aerospace sector and pursue vital policies like the protection of Arctic sovereignty.

"My bottom line is this: Canada must retain jurisdiction and control of technologies that are vital to the future of our industry and the pursuit of our public policy objectives," he said. ``We will not accept the loss of jurisdictional control to another party or another country."

On Thursday, Prentice served notice that Ottawa was denying preliminary approval for the sale of Vancouver-based MDA, which produces the Canadarm, Dextre robot and Radarsat-2 mapping satellite, to U.S. defence contractor Alliant Techsystems Inc. of Edina, Minn. [ATK].

Prentice was at the Canadian Space Agency, south of Montreal, yesterday to give a speech marking the 50th anniversary of Canada's space program. But during his address to a group of agency employees, he also shed more light on his decision to block the MDA purchase. Prentice said the ownership of technology and the development of the space industry are "inextricably linked, you cannot have one without the other."

He also spoke in greater detail about the proposed deal's impact on Canada's plans for northern development and climate change policies, among others. “We use earth observation to keep track of our vast land mass ... We can help in search and rescue operations and protect our sovereignty by monitoring those who enter our waters. ... We will vigorously protect our Arctic sovereignty," he said.

The federal government has invested heavily in MDA projects like Radarsat-2, which was decades in the making and has cost between $445 million and $800 million, depending on who does the accounting. Indeed, the company has received roughly 50 per cent of the space agency's funding budget through its various contracts.

Critics of the sale have also raised concerns about who would control the imaging data gathered from the satellite, which could find itself subject to strict U.S. security regulations and be kept out of Canadian hands. Alliant has 30 days to contest Prentice's ruling, made under a little-used provision of the Investment Canada Act.

Both ATK and MDA maintained Thursday that the review process is ongoing and that no final decisions have been made. But from Prentice's words yesterday it's difficult to see how he could be swayed. Ottawa's decision also scotches MDA's restructuring plans. During a news conference, Prentice ducked questions on whether the federal government would be willing to step in with a financial assistance package as the opposition parties demand.

"I'm not here to announce specific investment decisions today," he said, adding the federal government will continue to seek technology partnerships through the space agency. Prentice also shrugged off the suggestion that his decision could create a chill for other foreign firms contemplating buying Canadian assets.